Insurance Pro Blog Podcast | Life Insurance and Annuity Insights

With the current wave of companies lowering the caps on indexed universal life contracts, we thought it would be good idea to share our thoughts on that today.

Honestly, we've been “low balling” expectations on IUL contracts since we started offering them to our clients five'ish years ago. And that was back when some policies offered cap rates as high as 14%.

Now, I do hope that you all realize I'm being a bit tongue and cheek with the “low balling” comment above. Actually, we just believed that using a lower projected return was prudent.

If you've been hanging out around here for any length of time, you know that Brandon likes spreadsheets and pivot tables….a lot. What more fun can you have on a Friday night?

But seriously…

He put in a lot of effort to calculate mathematical probabilities of certain returns over time using historical returns as the input. What does all that mean to you?

I can't reveal every step of how he arrived at the conclusions for what's a reasonable expected return for an IUL contract. That's part of our secret sauce.

What's more important for you to know is that we've never used anything close to what insurance company software default rates were (or are now for that matter). There were some that defaulted to well over 8%.

Those default rates made us very uncomfortable because when we looked at the probability of success it was between 80-85%.

Those odds are not good for what we do. Our clients are planning to place substantial sums of money in their policies for extended periods of time. They are planning on this actually working out for them with a high degree of certainty.

They can't get a “do-over” 25 years from now when the projected return falls short. The result will be that they have far less cash than originally planned and that is not good.

Using life insurance as an alternative asset class or as a way to generate tax-free retirement income is meant to be conservative. Our clients aren't taking a home run cut with this portion of their portfolio.

We plan accordingly.

 

Well the summer's over. Which obviously means that we're not allowed to have anymore fun…right? You'd certainly think that if you were looking at our episode from last week and what we're discussing today. In episode 42, we're continuing with the spirit of last week's episode. So, if you that was the greatest thing we've ... Keep Reading

 

Well the summer's over. Which obviously means that we're not allowed to have anymore fun…right?

You'd certainly think that if you were looking at our episode from last week and what we're discussing today.

In episode 42, we're continuing with the spirit of last week's episode. So, if you that was the greatest thing we've ever released, awesome.

Sadly, if you thought it was awful, you'll likely be disappointed in this week's episode.

Either way, I think you'll find the discussion useful.

Today's episode is all about the metrics we dig into when we're evaluating the life insurance companies that we actually want to work with.

Yes, individual design capability and policy performance are important.

But first, we gotta make sure the company itself is healthy and that we see them trending in a positive direction going forward.

If that interests you, listen on.

I'll make every effort to push something next week that's a little less focused on the minutiae. Stay tuned!

 

Today we are revisiting something that has popped up a few times over the years of writing and podcasting. But our take is a bit different and the focus of this episode follows suit. Our discussion revolves around universal life insurance. And no, we're not hopping on board the media frenzy that wants to adopt ... Keep Reading

 

Today we are revisiting something that has popped up a few times over the years of writing and podcasting. But our take is a bit different and the focus of this episode follows suit.

Our discussion revolves around universal life insurance. And no, we're not hopping on board the media frenzy that wants to adopt a scorched Earth policy for every universal life insurance policy ever sold.

Nor are we lampooning every company that's ever issued universal life insurance.

In fact, as those of you who've been hanging around for a while already know, we sell a fair amount of indexed universal life insurance ourselves.

But…

Recently (in the past year) there have a been a handful of companies that have announced an increase in expenses to certain blocks of their universal life insurance.

Now, these companies have always had the contractual right to do so if necessary. It's just that it's never happened on widespread basis among several companies at the same time.

The most common reason that's being given for expense charge increase is the prolonged period of low interest rates that we're experiencing here in the United States.

That seems plausible…right?

And we can go along with that to some extent.

However, recently the New York Times published an article that exposed some other things that we consider to be bad behavior. And because of that, we felt the need to open this discussion once more.

Here's a link to the article from the NYT to provide you with some context.

 

Just yesterday, we realized that since we started the podcast back in November of 2015 we've not discussed anything specifically regarding single premium life insurance. With interest rates today at their lowest point in recent history and for a protracted period, many life insurance companies have chosen to pull their single premium products. But there ... Keep Reading

Just yesterday, we realized that since we started the podcast back in November of 2015 we've not discussed anything specifically regarding single premium life insurance.

With interest rates today at their lowest point in recent history and for a protracted period, many life insurance companies have chosen to pull their single premium products. But there are still a few available.

Today we're going to tell you why you would even care, when you might care and what different scenarios might warrant a closer look at using a single premium policy.

It's not an overly complicated subject but it's probably something that we should've talked about before now. Sometimes it's easy to overlook even the most basic solutions.

Let us know if you have any questions!

If you haven't listened to episode 38, I encourage you to go back and listen to it before you listen to this one. Not that you have to but I think that listening to both of them will give you a better perspective. We believe that the need to really understand income planning is ... Keep Reading

If you haven't listened to episode 38, I encourage you to go back and listen to it before you listen to this one. Not that you have to but I think that listening to both of them will give you a better perspective.

We believe that the need to really understand income planning is so important we've dedicated two weeks to discussing it hear on our podcast.

In this second part of our discussion we're talking more specifically about the “illusion of control”. What do we mean by that?

Well, over the years one of the more difficult conversations I've had with prospective clients is the one where I suggest they convert at least a portion of their savings/investments to an income stream.

This could be using any number of annuity products–it just depends on the situation and what need there is for a particular income.

Time after time, the major objection that comes up is that people just don't like the idea of giving an insurance company a lump sum in exchange for a permanent income stream. It feels nice to see a statement with a large sum.

And exchanging that large sum of money for an income stream means that often times you are relinquishing control of the lump sum. That's scary for many of us. I get it.

But you know what's more scary?

Not having money on a monthly basis to cover your monthly expenses. I'm not talking about money that your gonna spend to cruise the Aegean for two weeks. No, I'm talking about money to pay the utility bill, cable bill, your property taxes etc.

The basics of living in a civilized society.

Having income to meet your basic needs frees up the rest of your money to do other things. And if you've planned correctly, you won't need to use ALL of your money to create your income, just a portion of it.

 

I know, when you see a title that includes “income planning” you begin to wonder… “Isn't this a podcast about life insurance?” Yes, it is. And we are talking about life insurance, annuities, etc. in the episode as we wrap up this discussion about income planning. But we felt like it was really important to ... Keep Reading